I believe we have completely lost our way on which KPI’s (Key Performance Indicators, i.e. metrics) are important when measuring our performance in developing new business. I’m going to introduce a KPI today that cuts through the fog.

First, Some Not-So-Fun Facts
The following three numbers will come as no surprise to experienced sales professionals.

Only 3-4% of voicemails left by salespersons for prospects are returned.

Only 1% of phone contacts with prospects culminate in a sale.

Only 3-5% of direct (i.e. on-site) prospect contacts result in a sale.

It’s Broken
Everyone who does any volume of prospecting knows how ineffective conventional cold calling is. We don’t even like to talk about it. Sales managers assign new account goals knowing what they’re doing is really assigning a task, not a goal.

The problem is that sales managers and sales professionals aren’t paying attention to the yield they are getting on their new business development efforts. “Prospecting Yield” is a simple and accurate indicator of prospecting effectiveness.

Prospecting Yield Defined

Prospecting Yield = Total Revenue Generated ÷ Number of Prospects Contacted

The resultant number will tell us what the average revenue is for each of our prospecting contacts for a defined period. A high Prospecting Yield indicates higher efficiency in the prospecting process.

There are a number of common variables missing in the simple formula above. The missing variables tell us everything we need to know about why Prospecting Yield is a useful and important number.

The Missing Variables
Close Ratio. Who cares what our close ratio is if our average order size is a nickel? This number is worthless.

Average Order Size. Average order size only tracks the prospects that ordered. Scenario One: A salesperson makes 1,000 new business contacts and closes two orders with an average order size of $2,000. Scenario Two: A second salesperson also write two orders with an average order size of $2,000 but does so by making only 50 contacts. The yield (or efficiency) of the second sales professional is twenty times that of the first.

Number of Orders.While any smart sales manager doesn’t want to see members of his or her sales force get the majority of their business from a handful of orders, 200 orders that average a couple of dollars each aren’t going to get anyone promoted.

The Wrong Focus
Sales management and sales professionals are guilty of viewing the process of new business development as the end game, the goal, the task to be completed.

It becomes a feel-good exercise of activity. Since most of us have concluded that conventional cold calling doesn’t really work, we focus on the mechanics instead.

Sales Blog Rx
The following is a prescription for prospecting success. It also will shine light on the true effectiveness of a business development program.

Stop seeing only the nuts and bolts of prospecting; the goal of prospecting is revenue – i.e. nice-sized orders.

Use Prospecting Yield to measure prospecting performance. Note: This KPI is increasingly more accurate as the number of contacted prospects grows.

Create a standardized prospecting process that uses best practices that have been learned from the rainmakers.

Sales Blog Epilogue
We have to realize that quality of prospecting, versus quantity, is what yields the highest results in 2009. Prospects want us to know about their company, their industry, their needs and even their points of pain before we initiate the first contact. Higher Prospecting Yields will mean fewer prospect contacts – but with much higher net results.

Further reading:
Prospecting By Going-Through-The-Motions, Part 2 of 4

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>©2009 Scott R. Sheaffer

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Related posts:

1. A Simple, Effective and Classy Cold Calling Idea
2. Contrary to popular opinion, sales is NOT just a numbers game.
3. When Is The Best Time To Prospect?
4. You’re More Effective At Prospecting Than You Think
5. 3 Reasons You Need A Sales Process

Tags: closing, manager, performance, Prospecting, prospects

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